CRM vs ERP : What’s The Key Difference?

Businesses must integrate with Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) to automate core business processes. Both these main software solutions are required for a smooth workflow in different organizations. Companies can operate their core processes with the help of ERP,  by combining the financial and operational systems with a central database. On the other hand, CRM helps companies to manage the interaction of customers with their businesses.

CRM vs ERP, both provide their services as vital data repositories. Both are available to provide their services to multiple departments while they are both built on the same platform. Moreover, according to the requirements they can be bought separately and integrated.

This article will provide you with a complete guide on the features of both CRM and ERP and also describes the difference between them. It will also help to identify the needs of ERP, CRM, or both for businesses.

What is CRM?

In brief, CRM is software that handles customer interaction with a business in multiple ways. In the beginning, CRM features were developed to handle the process of sales departments and were known as sales force automation (SFA). In order to manage customer service interactions and markings, some other systems were developed. These systems were specially designed to be used in the call center to collect basic customer information including name, telephone number, date of birth, and email address.

The disciplines of all software vendors began to combine under one umbrella through acquisition and development, which is known as customer relationship management. CRM systems also include some other software like sales performance management and sales incentive compensation. But due to their complex nature, they have to be sold separately.

CRM Benefits

CRM is giving a central repository to businesses for the collection of all customer data and tracking of all customer interactions.  Through this, businesses can create more informed decisions about the added revenue of customers, the performance of sales teams, customer services more efficiently and appropriately, and many others.

CRM solutions can be integrated with all kinds of businesses to manage customer relations in an effective manner. For instance, solo freelance operations, in-home e-commerce, small businesses, and enterprise-level corporations, and more. A CRM system can access the processes of all categories with managing customer relationships with extreme levels of integrity.

What is ERP?

Enterprise resource planning (ERP) is developed from material requirements planning (MRP). It was a perfect way for manufacturers to handle the required resources to run a business in a successful manner. All the parts of an organization can get the shared database with the help of ERP. For example, the finances, including general ledger (GL), accounts payable and receivable, payroll, and financial reporting.

Although ERP also collaborates with inventory management, order management, supply chain management, and data of services organizations. ERP manages the procurement, production, distribution, and also fulfillment. Besides this, Human Resource Management Systems (HRMS), CRM and eCommerce are also offered by various ERP systems.

ERP Benefits

The ERP system is beneficial for all financial and operational data in the form of a single and shared database. This is mainly affecting the reporting including static monthly reports as well as ad hoc reports on the request of leadership. A single source of financial and operational data refers to the process of drilling down into reports to uncover financial insights from the employees. The interference of IT or finance teams is not required to conduct the analysis and reporting. This help businesses to run the operations faster and take quality decisions that are responsible for profitability and growth opportunities across the organization.

Furthermore, an ERP system is also beneficial for companies for a faster financial close. Finance teams indulge in the handling of all income and expenses accounts and tabulate the final results.  This process is known as closing the books which are completed at the end of every month or quarter. To complete the process of closing the books, the financial team has to use spreadsheets or entry-level systems. In order to collect the financial information for closing the books, they require extensive manual work, data entry, and contracting different departments. But nowadays, with the implementation of the ERP system, companies are able to complete their tasks only in a few days like reported reductions in monthly close times and many others.

ERP systems have the capability for great financial control in an organization. By using this centralized system and role-based permissions, one who is having the perfect job functions gets access to sensitive data, increasing the audit trails and decreasing financial risk.

CRM vs ERP: What is the difference?

Although the entire organization will integrate with both ERP and CRM systems, there are some fundamental differences between ERP and CRM. ERP is primarily used for financial data and the finance department, whereas CRM refers to customer data required for sales and customer service departments. In short, ERP is commonly used for back-office operations and the CRM is referred to as the front office.

However, there are some ERP systems having a CRM component, on the other hand, CRM systems do not collaborate with any ERP components. For instance, Salesforce.com cannot be considered as an ERP system because it is unable to support transactional data. It can even handle the order history or invoices, but integration with the ERP system is required if you bring in this data.

How are CRM and ERP similar?

ERP and CRM are both used for businesses as they are business software, which is used to store and analyze data in a relational database. The delivery of both these business applications can be possible through a traditional on-premises model or through software as a service (SaaS). At this place, vendors handle the software in their own data center, where customers can access it by using the cloud.

Besides this, NetSuite and Salesforce.com are two pioneers in business applications. NetSuite is related to SaaS ERP and Salesforce.com to CRM and they both got their start at the same time. But the CRM systems were moved to the cloud quickly in comparison to the ERP. All this is possible because the systems were simpler to build and businesses were also given first preference to putting the financial data in the cloud.

Do I need CRM or ERP or both?

ERP and CRM systems, both are used by growing companies, from small to large enterprises. Companies manage their finances by using entry-level accounting tools. For instance, Quickbooks or spreadsheets move to an ERP system, when they realize that those systems are hindering their growth.

The above-mentioned procedure is the same for businesses who are willing to manage their customer relationship through the individual sales reps’ email clients, spreadsheets, or contact management systems. The first preference for CRM or ERP will be based on the model of a business. An ERP system must be integrated as a priority, especially for those companies that have a small set of high-value customers and complex financials. While a company with straightforward financials and a large customer base might be apt to first invest in a CRM system.

In a nutshell, it can be declared that both systems are prominent for most companies.

Integration of ERP and CRM systems

ERP and CRM systems require the ability to share data. But this process can be completed in a perfect way through a technical integration vs. having two sets of data that required maintenance separately.

For instance, a sales rep must have the accessibility to a customer’s order history or credit status during the upsell or cross-sell campaign. The finance department might want to access the CRM system in order to calculate sales commissions when taking bulk order discounts or they run payroll. A CRM system combined with an ERP platform provides a great benefit for business leaders when they want to examine pricing structures and manage KPIs. These functions may include customer acquisition costs and customer lifetime value.

CRM and ERP integration is required for the process of configuration, price, and quote (CPQ). CPQ tools need to access the information in both the CRM and ERP systems that are important for various businesses. The larger CRM and ERP vendors have contributed their functions with pre-built integrations that are offered by them or a third-party partner. However, there is a drawback that integration may be expensive or difficult to maintain when both systems face an upgrade.

ERP systems integrated with CRM have a number of benefits. Firstly, ERP and CRM systems in a combined manner will be available at low cost than purchasing both systems individually. Secondly, all information can be updated in real time without waiting for any batch uploads or middleware connections. Finally, the systems developed for ERP have the capability to handle transactional processes. That refers to the programming customizations and third-party tools.

Conclusion

ERP and CRM systems, both are important for the smooth workflow of businesses. Unified integration in business plays a vital role to increase productivity and decrease workload.

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